Dodging Worst of FTX, Arca Won’t Stay ‘Stagnant’

Blockworks exclusive: Digital assets-focused investment manager Arca looks primed to cap off an up-and-down year via a previously unreported Series B likely to exceed capacity

article-image

Rayne Steinberg, CEO; Source: Arca

share

In a yo-yo of a year for digital asset investment managers, Arca has largely held its ground.  

The hedge and venture fund firm, in fact, is in the middle of finalizing a Series B round, according to two sources familiar with the matter. Arca CEO Rayne Steinberg confirmed the fresh capital-raise in an interview with Blockworks, saying it ought to be finalized in the coming months. 

That’s not to say it’s been a painless year for the Los Angeles-headquartered operation. There have been a number of headaches, from choppy returns to operational and fundraising pivots. 

Case in point: Arca first started outreach for the Series B about a year ago — near the height of the bull market, long before digital assets lost 70% of their collective market capitalization. 

The firm also booked significant losses in its flagship strategy earlier in 2022, when the top-heavy market’s bottom fell right out on the Terra ecosystem — following the de-pegging of Terra’s stablecoin, UST — as well as the rapid collapse of over-levered crypto lenders, including Celsius and Voyager. 

Sources said Arca was hit with fairly minor redemptions. Its liquid products offer monthly subscriptions and redemptions. But savvy repositioning and open lines of communication to limited-partners appear to have prevented a more dire outcome. And, crucially, Arca’s funds had minimal exposure to FTX, Steinberg said, though he declined to specify an exact figure. 

“Our investment mandate is broad, and our buckets are also broad, so those changed in an environment where [assets have become] super-correlated to macro,” Steinberg said. 

The Arca head, tasked with heading business development for the Series B, decided to wait it out. The new plan: rejigger classification of the capital— settling on compliance, infrastructure and staffing, in both the parent company and its affiliate startup innovation and advisory division, Arca Labs.

“The environment really changed with Luna and upended it and really changed the makeup of who was going to be in it,” Steinberg said.

Following its seed round, Arca closed a $10-million Series A in January 2021 led by RRE Ventures. The firm likewise then-declined to detail its valuation.

Navigating regulation  

Regulators, the SEC and the CFTC in particular, have scrambled to get a handle on the swiftly changing developments, a push expected to intensify on the outcome of the US’ midterms. 

Steinberg welcomes the scrutiny. Amping up the financial watchdogs’ powers, while perhaps overdue, ought to weed out an assortment of digital asset bad actors, including fraudsters. New regulation, as well as the potential for congressional legislation, would give a leg-up to asset managers — including Arca — with robust compliance structures and featuring executives who cut their teeth on Wall Street. 

The institutional investment manager  — whose limited-partners are predominantly the likes of endowments and pension plans — has historically sourced potential investors from what Steinberg dubbed “the gateway [to] traditional finance.” It’s also important for the startup’s partners to maintain their own distribution channels.

Despite a number of indicators that deep-pocketed TradFi investors are sitting out crypto’s latest volatile session — and some prominent figures, according to industry participants, are pulling out entirely — Steinberg said the vast majority of the Series B’s likely backers have not had much exposure to recent market conditions. 

Fending off the bear market

The chief executive declined to disclose the specific investors with Series B commitments, or entities now in the midst of due diligence. But there is some crossover between Arca’s existing limited-partner roster, according to Steinberg, formerly WisdomTree Asset Management’s co-founder.

The Arca co-founder also declined to comment on how much capital the firm is targeting for the venture round, citing the fundraise still being in the works — and would not disclose an approximate new valuation under the same rationale. 

Arca’s exact year-to-date showing for its main fund isn’t known, but one source said they were “far outside the norm,” which typically has a “healthy respect for risk.” The team’s portfolio managers clawed back a “good chunk” of those losses in the coming months — and then dipped again as markets were rattled by FTX’s bankruptcy. The fund outperformed spot bitcoin and ether from the start of November through last Friday, however.

The asset manager’s flagship fund employs a global macro approach, utilizing a bottom-up, fundamental technique — pioneered by TradFi stock-pickers and adapted for crypto — to inform its trading. That vehicle, and additional investment products, are now quite overweight cash as market participants parse the likelihood of yet more counterparties having to close up shop before year end. 

Steinberg and execs have undertaken a “deep dive” into Arca’s response mechanisms to contain sudden market plunges. The self evaluation has focused on risk, initial counterparty due diligence and regular followup check-ins. 

“You can’t get everything right, and if you’re stagnant, you’re [in trouble],” Steinberg said. “What worked yesterday won’t work tomorrow. Even when things go wrong, you’ll have to evaluate them, too.”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Featured.png

Research

Helium stands at a pivotal moment in its evolution as a decentralized wireless network, balancing rapid growth, economic restructuring, and global expansion. With accelerated growth in domestic DAUs and Hotspots supporting its network, Helium is leveraging strategic partnerships and innovative proposals to scale internationally. The recent implementation of HIP 138, “Return to HNT,” has unified its token economy under HNT, simplifying participation and strengthening liquidity, while HIP 139’s phase-out of CBRS refocuses efforts on scalable Wi-Fi offload. Meanwhile, governance shifts under HIP 141 raise questions about centralization as Nova Labs consolidates control over the roadmap.

article-image

The DeFi Education Fund has ideas on how the crypto-friendly SEC can bring Commissioner Peirce’s vision to life

article-image

“Be prepared to do more with less,” Framework Ventures’ Michael Anderson said

article-image

Q1 may have been “frustrating,” but things are looking brighter for Q2

article-image

Tokens worth 20% of the current supply of the TRUMP memecoin launched by the president are set to be unlocked tomorrow

article-image

A crypto-industry lawsuit is “moot” now that Joint Resolution 25 has been signed into law

article-image

Fed Chair Powell assured markets that the labor market is in “good place,” dependent on price stability